I may not have extensive knowledge of the banking sector, but as a citizen, I feel compelled to share my observations.
I do not have any business or investments in banks, so this is not driven by anger. However, my perspective is slightly different.
We have numerous banking institutions that appear robust. They seem to be distributing dividends, functioning well, and led by experienced CEOs.
But what tangible productivity does the banking sector bring to the table? Has it contributed to the growth of agriculture, industry, or tourism? Where is the evidence of its impact?
Is its role limited to transactional activities or accounting? Has it made a measurable difference in the quality of life?
The banking system is large and strong, with a highly skilled workforce. But where is the contribution?
My question is whether there is a problem with banking governance. Both the National Bank and other related institutions should be held accountable for this.
Are banks functioning merely as facilitators, or have they become too focused on control? Are there loopholes in the system?
How satisfied are bank customers? This is a question we need to explore. The auctioning of small traders’ assets happens quickly, but big traders don’t face the same pressure.
It’s evident that one class of people has easy access to loans, while another struggles just to inquire about them. Have we created such a divide?
Banks Should Not Be Moneylenders
Banking is not just about institutionalized lending; it’s a special institution that plays a crucial role in regulating and stabilizing the economy.
However, we must ensure it is not reduced to just another moneylender. Where is the productivity from this sector? Can banks even claim it?
Non-banking assets are rising at an alarming rate. Banks have money to invest, but there is no demand. Without demand, the Nepal Rastra Bank is forced to withdraw funds.
On one hand, the economy is stagnant, and on the other, there’s no demand for capital.
This creates an environment where entrepreneurship struggles to thrive, and the economy cannot remain viable. If the NRB’s only role is managing the money supply, how can the purpose of these institutions be justified?
The rise of cooperatives and defects in governance
Why have cooperatives increased in number? While their shortcomings have grown alongside their numbers, could this be a result of the controlling policies within the banking governance system?
As banks become more control-oriented, cooperatives have flourished in a more uncontrolled environment. Could this imbalance explain the rise of cooperatives?
Global banking standards and their relevance
What are the standards by which banks operate? Are they in line with global banking practices, or are they overly influenced by foreign institutions? Have we blindly adopted foreign standards without considering national needs, justifications, and relevance?
The role of the government in remittances
Remittances have reached a significant amount, around 2.2–2.3 trillion, which is positive. If our economy were solely import-oriented and lacked foreign exchange reserves, we would be in dire straits.
The increase in remittances is undoubtedly important. However, what has the banking sector contributed to this rise? What role has the formal economy or the government played in this?
While the remittance figure is worth noting, it’s crucial to acknowledge that it was earned through the hard work and sacrifices of our people.
What major contributions have the government or banks made to facilitate this growth?
The need for export promotion and saving
If we had managed to increase exports or diversified income sources, that would have been a significant achievement.
Instead, we rely on remittances, which, while helpful, should not be our only measure of economic success.
How are we addressing import substitution or encouraging exports? What steps are being taken to promote savings?
I don’t see any serious conversation around saving. With reduced imports, government revenue has dropped, making it harder to sustain operations.
The direction of our economy
Where are we headed with our economic policies? We talk about banking institutions, banking laws, institutional ethics, transparency, and accountability, among other things.
However, the complexity of these issues has direct implications for national security, economic stability, and the happiness and prosperity of the people. It’s time we reevaluate the impact of these policies on the broader picture.
Why is ‘Check Bounce’ criminalized?
If you ask the police today, you’ll find that many people are in jail for check bounce cases.
These individuals are incarcerated because their checks bounced, and now they face criminal charges. Who is responsible for the rise in ‘economic crime’? Is this fair?
What is the basis for the state to consider a check bounce as a crime? If I lend you personal money and you fail to repay, I can file a general transaction case and recover the funds.
But why is it treated so seriously when I sign a check? The law itself has been shaped by this. How justified is this approach?
Have we become overly stringent and control-oriented in the name of strengthening banking institutions and practices?
We have policies like KYC (Know Your Customer), which prevent individuals from accessing banking services without proving their financial standing.
But when you can’t show your money to the bank, it often ends up somewhere else.
You might seek easier solutions through cooperatives, only to find that there’s no security, no money, and no stability. As a result, the economy stagnates or even falls into recession.
In check bounce cases, I believe bankers have used their power unjustly. Blacklisting individuals doesn’t lead to recovery; it doesn’t make them pay or increase their capacity.
It only impacts their ability to access services. The focus should be on helping them get back on track—on restoring their business, making them eligible for loans, and enabling them to repay their debts.
What role do banks play if there are no borrowers? Banks exist to serve borrowers, who are the investors and drivers of the economy. Therefore, it is crucial not to neglect or marginalize borrowers.
These individuals should not be treated as criminals. They are part of our society; they are entrepreneurs and workers who contribute to the economy. That’s why the criminalization of check bounces should be reconsidered.
Now, we also have the Banking Offenses Act and the Bafia Act. I believe these should be reviewed carefully.
Justice for debtors
I’ve heard that the government is reforming the Banking Act, although I haven’t read the details yet.
But I do believe that some aspects need to be addressed in the reforms.
How satisfied are bank customers? This is a question we need to explore. The auctioning of small traders’ assets happens quickly, but big traders don’t face the same pressure.
Instead of rapid auctions, there should be options to reschedule payments. What happens if small entrepreneurs and traders become scared and avoid the banks? There needs to be an approach that doesn’t drive them away.
Banking services should be accessible to small business owners. These services should be easily available to them, and their economic utility should be expanded. If banking services remain concentrated only at the top, it will harm the broader economy.
The power imbalance between bankers and borrowers
From what I see, bankers hold more power than borrowers. When bankers are organized, borrowers feel powerless.
No matter how much pressure borrowers face, bankers are often in a stronger position, able to ‘manage’ everything from legal matters to enforcement.
The future of the economy depends on how fairly we treat loan consumers. If there are no borrowers, what is the role of banks?
The borrowers are the investors; they drive the economy. Therefore, it is crucial not to marginalize and abandon them.
Banks should adopt an approach that listens to the borrowers’ problems with respect and addresses them fairly.
Otherwise, banks risk becoming a new version of the oppressive moneylenders seen in literature, such as the character Shylock from Shakespeare’s The Merchant of Venice. Shylock, a merchant who borrowed money from a moneylender, had agreed that if he couldn’t repay, the moneylender could take a pound of his flesh.
When he failed to pay on time, the moneylender took him to court, invoking the loan’s terms. Banks should not become modern-day versions of this cruel arrangement.
Justice should be served to debtors
I’ve heard that the government is currently reforming the Banking Act, although I haven’t read the bill yet. However, I believe there are important issues that need to be addressed.
How satisfied are bank customers? This is something we need to assess. The auctioning of small traders’ assets happens quickly, but large traders often avoid the same fate.
Instead of auctioning their assets, perhaps we should consider rescheduling their payments.
What happens if small entrepreneurs and traders become intimidated and avoid the banks altogether? If the banking sector becomes unattractive to them, it will harm the economy.
Banking services should be easily accessible to small business owners. These services should reach people in need and be designed to provide real economic benefits.
When Shylock’s business collapsed and he couldn’t repay on time, the moneylender took him to court with the original loan agreement. This should not be the future for borrowers in our banking system.
If the benefits of banking are only concentrated at the top, it will not be good for the broader economy.
The power imbalance between bankers and debtors
What I observe is that bankers are in a stronger position than debtors. When bankers are well-organized, debtors feel powerless.
No matter how much unfair pressure debtors face, bankers are in a better position to handle everything—from legal matters to enforcement.
When we talk about these problems, let’s not just focus on the negatives. It’s as if there is a landslide near our house. Without acknowledging this, there can be no happiness or progress.
The future of the economy depends on how fairly we address the interests of loan consumers.
What role do banks play if there are no borrowers? Banks exist to serve borrowers, who are the investors and drivers of the economy. Therefore, it is crucial not to neglect or marginalize borrowers.
Banks should adopt an approach that listens to borrowers’ concerns respectfully and addresses them fairly.
Otherwise, we risk seeing banks become a new version of the oppressive moneylender from Shakespeare’s The Merchant of Venice.
In the play, Shylock, a merchant, borrowed money from a moneylender under the condition that if he failed to repay, the moneylender could claim a pound of his flesh.
When Shylock’s business collapsed and he couldn’t repay on time, the moneylender took him to court with the original loan agreement. This should not be the future for borrowers in our banking system.
Bank cartelization is at the center of this issue. If we are to create such a front, we don’t need banks—our traditional lenders are enough. They know how to exploit the system.
This is a highly sensitive matter. There may be issues with the law itself, with economic policy, or with the budget. Our reluctance to repay loans could also be a psychological issue.
Additionally, there may be problems with our priorities or systematic flaws in the economic plan. There are countless challenges to consider.
When we talk about these problems, let’s not just focus on the negatives. It’s as if there is a landslide near our house. Without acknowledging this, there can be no happiness or progress.
(This article was based on questions raised by former Chief Justice Kalyan Shrestha during an interaction ‘Challenges in the Banking Sector’organized by Khabarhub.com and the Institute for Strategic and Socio-Economic Research (ISSR)
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